Euro to Australian Dollar Exchange Rate Volatile Near Highs on US President Trump’s Latest Comments

Euro to Australian Dollar Exchange Rate Volatile on US President’s Fed Comments

Fears over US trade protectionism and the US-China trade war persisted this week, but despite that both the Euro (EUR) and Australian Dollar (AUD) strengthened. The Euro to Australian Dollar (EUR/AUD) exchange rate has benefitted from other factors weighing on the ‘Aussie’.

Since opening this week at the level of 1.5738, EUR/AUD has fluctuated within a wide region due to the Australian Dollar’s volatility.

EUR/AUD briefly hit a July low of 1.5667 on Thursday before surging and touching a two-month-high of 1.5883 on Friday. At the time of writing, EUR/AUD had slipped from those best levels and trended in the region of 1.5812.

Demand for both currencies rose on Friday as US President Donald Trump appeared to criticise both the strength of the US Dollar (USD) and the Federal Reserve’s higher US interest rates.

The comments worsened concerns about the possibility of the Fed being influenced by the President’s comments. US bond yields fell and currencies that weaken from strong Fed bets, like the Euro and ‘Aussie’, strengthened.

Investors found the Euro one of the more appealing major currencies towards the end of the week, as despite the week’s underwhelming Eurozone ecostats the bloc’s economic outlook is still generally optimistic.

Investors had been selling the Euro earlier in the week amid signs that US trade tariffs could have a negative impact on the Eurozone’s economy.

Then on Wednesday, Eurozone core inflation fell short of forecasts and left investors doubtful that the European Central Bank (ECB) would hike Eurozone interest rates until the second half of 2019 at the earliest.

However, the ECB is still expected to lighten its quantitative easing (QE) program and hike rates before 2020, despite the global trade jitters. Eurozone economic growth has also showed signs of picking up again after slowing earlier in the year.

As a result, the Euro benefitted from the latest US Dollar (USD) selloff and US President Donald Trump’s shock to markets.

Investors haven’t had much reason to buy the Australian Dollar in recent weeks, as concerns about the US-China trade war build and investors find risky trade-correlated currencies like the Australian Dollar unappealing.

The Australian Dollar has come under pressure particularly strongly, as China is Australia’s biggest trade partner. With Australia’s trade with both China and the US potentially under threat amid the trade war, AUD investors are anxious.

Like the Euro though, the Australian Dollar saw stronger demand when US President Donald Trump took aim at the strength of the US Dollar (USD) and higher Federal Reserve interest rates.

This week’s Australian data has been relatively solid too, and has helped the Australian Dollar to hold its ground against the stronger Euro.

EUR/AUD may have ended the week even higher if Australia’s June employment change results hadn’t come in well above forecasts.

Next week is likely to be an influential one for the Euro to Australian Dollar (EUR/AUD) exchange rate, as trade developments will continue to influence both currencies but major domestic data will be published too.

Eurozone confidence data will come in throughout the week, with Eurozone stats on Monday and business and consumer confidence figures from France and Germany from Tuesday through Thursday.

The most important key datasets next week will be the Eurozone’s July PMI projections from Markit on Tuesday, which will give investors a better idea of how the Eurozone economy has been performing this month.

Then on Wednesday, Australia’s anticipated Q2 Consumer Price Index (CPI) inflation results will be published. If Australia’s inflation is higher than expected, investors will become more confident about Australian price pressures and the Australian Dollar would strengthen.

Of course, the biggest event next week will be on Thursday, when the European Central Bank (ECB) holds its July policy decision. The bank’s tone on US trade protectionism and the Eurozone economy are likely to drive EUR/AUD movement.